Tag Archives: Oil

Nasdaq hits record high after Fed leaves rates unchanged

Floor governor Giacchi gives a price for Noble Midstream Partners LP, during the company's IPO on the floor of the New York Stock

By Yashaswini Swamynathan

(Reuters) – The Nasdaq hit a record intraday high on Thursday amid broad gains in U.S. stocks, a day after the Federal Reserve stood pat on interest rates.

While the risks to economic outlook were roughly “balanced”, the Fed maintained rates as inflation continued to run below its 2 percent target and members saw room for improvement in the labor market.

The central bank slowed the pace of future hikes and cut its longer run interest rate forecast to 2.9 percent from 3 percent, but sent a strong signal for a move by the end of this year.

“The Fed probably appeared less hawkish than what the markets had expected,” said Ryan Larson, head of equity trading at RBC Global Asset Management in Chicago. “I think the market continues to be focused on the Fed pushing a hike for later as a good thing rather than bad.”

The consensus among economists is for a hike in December as the Fed’s November meeting comes right around the U.S. Presidential elections.

The probability of a November hike stands at a modest 12.4 percent, and rises to 58.4 percent for December, according to the CME Group’s FedWatch tool.

The dollar index dropped 0.6 percent on Thursday, and was on track to mark the second straight day of losses after the central bank’s decision.

Oil prices rose about 1.8 percent as the dollar fell and U.S. crude inventories recorded a surprise drop.

At 9:36 a.m. ET (1336 GMT), the Dow Jones Industrial Average was up 132.52 points, or 0.72 percent, at 18,426.22.

The S&P 500 was up 15.01 points, or 0.69 percent, at 2,178.13.

The Nasdaq Composite was up 32.98 points, or 0.62 percent, at 5,328.22, after rising as much as 0.65 percent to a record of 5329.92.

The S&P energy index surged 1.33 percent and was the top gainer among the 11 major sectors of the benchmark index.

Adding some support to the Fed’s plans for at least one hike this year was a report that showed the number of Americans applying for unemployment last week fell to a two-month low.

Shares of Apple rose 0.9 percent to $114.56 and was the top influence on the S&P and the Nasdaq after Nomura and RBC raised their price targets.

Red Hat rose 6.7 percent to $82.27 after the Linux operating system distributor reported second-quarter revenue and profit that beat market expectations.

One weak spot was Jabil Circuit, which dropped nearly 6 percent to $22.34 after the contract electronics maker said it intended to realign its business at a cost of $195 million over two years.

Advancing issues outnumbered decliners on the NYSE by 2,552 to 185. On the Nasdaq, 1,804 issues rose and 429 fell.

The S&P 500 index showed 26 new 52-week highs and no new lows, while the Nasdaq recorded 80 new highs and three new lows.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Don Sebastian)

New Caspian oil fields to add to glutted global market

Oil rig and infrastructure of D Island are pictured at Kashagan offshore oil field in Caspian sea in western Kazakhstan

By Olga Yagova and Alla Afanasyeva

MOSCOW (Reuters) – Two new Caspian Sea oil fields are due by the end of this year to add significant volumes of crude to a world market already in glut, possibly depressing prices just as producers including Russia talk about reviving them.

According to industry sources and a loading schedule seen by Reuters, the Kashagan field in Kazakhstan’s sector and Lukoil’s Filanovsky field in the Russian sector – both of which are scheduled to come on stream soon – will together produce at least 200,000 barrels of crude per day (bpd) by the end of 2016.

By the end of next year, according to targets previously announced by the fields’ operators, Kashagan and Filanovsky will between them produce about 500,000 bpd, equivalent to about 0.5 percent of global production.

Faced with world oil prices languishing at around $50 per barrel, Saudi Arabia and Russia – the world’s two biggest crude exporters – agreed on Monday to cooperate in world oil markets. Though they will not act immediately, they said they could limit output in the future.

The agreement pushed up prices on expectations that exporters would work together to tackle the glut. However, on Thursday Brent crude <LCOc1> was trading around $48.50.

The Caspian crude will come on top of extra oil from Iran, which is working to raise its exports back to around 2.4 million bpd, the amount it used to sell before sanctions aimed at curbing its nuclear programme were imposed. International sanctions were lifted earlier this year on implementation of a deal between Tehran and world powers.

Production at the long-delayed and hugely expensive Kashagan offshore project – the world’s biggest oil find in 35 years – will start in October this year, according to industry sources who have seen Kazakh Energy Ministry documents on the field.

Output will initially be 75,000 bpd in October, rising to between 150,000 and 180,000 in the November-December period of this year, the sources told Reuters, citing the ministry documents.

Asked about the plan, a spokeswoman for North Caspian Oil Company, the Kashagan operator, declined to give a breakdown of production figures for this year.

The Kashagan consortium comprises China National Petroleum Corp., Exxon Mobil of the United States, Italy’s Eni, Anglo-Dutch Royal Dutch Shell, Total of France, Inpex of Japan and Kazakh firm KazMunaiGas.

The project began producing oil in September 2013 but stopped a few weeks later after gas leaks in its pipelines.

$55 BILLION INVESTMENT

Filanovsky will export around 50,000 bpd of CPC blend, a light Caspian crude, between October and December this year, according to a loading schedule, a copy of which was obtained by Reuters.

Representatives of Lukoil confirmed that production would start this year, but declined to give figures for volumes.

The planned new Caspian production from the two members of the Commonwealth of Independent States (CIS), which groups most ex-Soviet countries, shows how difficult it will be for exporters to curb output, especially when commercial interests outweigh the wishes of government officials.

The Kashagan field is five years behind schedule and costs have rocketed. By the end of 2015, the amount invested in its first phase had reached $55 billion, according to the project’s operator.

“While Russia is lulling the world with stories about a freeze in production in order to stabilise prices, on its territory and in the countries of the CIS new fields are continuing to come on stream and it doesn’t look like anyone can do anything to stop it,” said an industry source who spoke on condition of anonymity.

(Editing by Christian Lowe and David Stamp)

Netanyahu says Netherlands, Israel to improve water, gas supply to Gaza

Israel's Prime Minister Benjamin Netanyahu attends the weekly cabinet meeting at his office in Jerusalem

AMSTERDAM (Reuters) – The Dutch government will assist Israel in improving water and gas supplies to energy-strapped Gaza, Prime Minister Benjamin Netanyahu said on Tuesday during a visit to the Netherlands.

Netanyahu said that while his government is in a conflict with “terrorists” in the occupied territories, Israel still wishes to improve the quality of life for most people living there.

“We have no battle, no qualms with the people of Gaza”, he said. “The first step is to improve the supply of energy and water to Gaza, including laying a gas pipeline.”

He said he was publicly committing to making it happen.

Gaza faces an energy crisis due to damage to its electric network from past conflicts, together with Israel’s coastal blockade and other sanctions and restrictions.

Currently the country has electricity less than half the time, using an 8-hour on, 8-hour off rationing system.

A gas pipeline from Israel could allow Gaza’s power plant to double generation from around 200MW at present.

Water supplies to Gaza and the Israeli-occupied West Bank have long been a point of tension between the neighbours, with the Palestinians saying Israel prevents them from accessing adequate water at an affordable price.

Netanyahu did not elaborate on details of the gas pipeline plan, saying only the Dutch, with their long history of water management, would help.

(Reporting by Toby Sterling and Anthony Deutsch; Editing by Jeremy Gaunt)

Oil rally under pressure; record Saudi output offsets U.S. drawdown

Oil field

By Barani Krishnan

NEW YORK (Reuters) – Oil’s near week-long rally was under pressure on Wednesday after an unexpected drawdown in U.S. crude and gasoline stocks was offset by worries that Saudi Arabia was cranking output to record highs even as OPEC talked of ways to ease a global glut.

U.S. West Texas Intermediate (WTI) crude futures <CLc1> were down 5 cents at $46.53 a barrel by 1:03 p.m. EDT (1703 GMT), after trading as much as 21 cents higher.

Brent crude futures <LCOc1> rose by 42 cents to $49.65 a barrel. It reached five-week highs of $49.75 earlier.

WTI’s discount to Brent <WTCLc1-LCOc1> widened to a six-month high, raising the export potential for U.S. crude.

Oil rallied about 11 percent over the past four sessions since Saudi Arabia, the kingpin in the Organization of the Petroleum Exporting Countries, stoked speculation the group was ready to reach an output freeze agreement with non-OPEC producers.

The markets briefly extended gains after the U.S. Energy Information Administration (EIA) said domestic crude inventories fell 2.5 million barrels last week, surprising analysts who had expected a build of 522,000 barrels. [EIA/S]

Gasoline stockpiles also fell 2.7 million barrels, more than expectations for a 1.6 million-barrel drop, the EIA data showed.

But the market’s upside was capped by a Reuters report that said Saudi Arabia could boost crude output in August to new records at 10.8-10.9 million bpd, overtaking Russia’s production, even as OPEC aims for a pact to curb global output.

The Saudis told OPEC they pumped 10.67 million bpd in July, versus their previous record of 10.56 million in June 2015. [OPEC/M]

Saudi-based industry sources said earlier in the year they expected the kingdom’s output to edge near record highs to meet summer demand for power. But they said it was unlikely that Saudi output will flood the market.

“One certain thing to be aware of is the Reuters report that Saudis may increase production to new record highs pushing near 11 million barrels per day,” said Tariq Zahir, trader in crude oil spreads at Tyche Capital Advisors in New York.

“With the U.S. rig count coming back online for several weeks, even if a freeze did happen we would be talking about freezing at higher levels of output,” Zahir said.

Before last week’s drawdown, U.S. crude stockpiles had risen unexpectedly in three previous weeks. The U.S. oil drilling rig count has also risen without pause for seven weeks, signaling more production ahead. [RIG/U]

Reports of refinery outages in the United States, including a crude unit at Exxon Mobil Corp’s <XOM.N> 502,500 barrel per day (bpd) plant at Baton Rouge in Louisiana, added to the market’s downside. [REF/OUT]

Traders will be on the lookout for a U.S. Federal Reserve statement due at 2:00 p.m. (1800 GMT) to gauge if interest rates are to rise soon.

(Additional reporting by Amanda Cooper in LONDON and Henning Gloystein in SINGAPORE; editing by Jason Neely and Marguerita Choy)

Oil prices slipped with rise in U.S. gasoline inventories

Oil and gas tankers are anchored off the Marseille harbour, southeastern France,

LONDON (Reuters) – Oil prices slipped on Thursday after a rise in U.S. gasoline inventories helped push U.S. oil stocks to a record high, reinforcing worries of a global oversupply.

U.S. crude and oil product stocks rose 2.62 million barrels in the week to July 15 to an all-time high of 2.08 billion barrels, the U.S. Energy Department said.

U.S. gasoline stocks  rose 911,000 barrels in the week, against a forecast for unchanged, and were well above the upper limit of the average range, data from the U.S. Energy Information Administration showed.

Tamas Varga, oil analyst at London brokerage PVM Oil Associates, said the build in U.S. oil inventories reflected a very well supplied global market.

“There is lots of oil around,” said Varga. “Market strength is not sustainable.”

U.S. light sweet crude for September delivery the new front-month contract from Thursday, was down 20 cents at $45.55 a barrel by 1350 GMT. The August contract expired on Wednesday after rising 29 cents, or 0.7 percent, to settle at $44.94 a barrel.

Brent crude was down 15 cents at $47.02 a barrel.

U.S. crude oil stock fell for a ninth consecutive week last week, dropping 2.3 million barrels.

But at 519.5 million barrels, crude oil inventories are at historically high levels for this time of year, the EIA said.

ABN AMRO senior energy economist Hans van Cleef said investors were concerned by the global oversupply and high inventories:

“Near-term there are still some downside risks,” van Cleef said, forecasting Brent could slip around $5 lower towards $42 or $43 a barrel.

July is the peak of summer when Americans traditionally take to the road, driving up gasoline demand.

A glut of refined products has worsened an already-grim outlook for U.S. crude oil for the rest of the year and the first half of 2017, traders warned this week, as the spread between near-term and future delivery prices reached its widest in five months.

(Additional reporting by Aaron Sheldrick in Tokyo; Editing by Dale Hudson)

Oil prices dive as Britain votes to leave EU

Voters for leaving EU, dropping oil prices

By Ahmad Ghaddar

LONDON (Reuters) – Oil prices slumped by more than 6 percent on Friday after Britain voted to leave the European Union, raising fears of a broader economic slowdown that could reduce demand.

Financial markets have been worried for months about what Brexit, or a British exit from the European Union, would mean for Europe’s future, but were clearly not fully factoring in the risk of a leave vote.

British Prime Minister David Cameron, who campaigned to remain in the EU, said he would stand down by October.

Brent crude <LCOc1> was down 4.85 percent or $2.47 at $48.44 a barrel at 1140 GMT. U.S. crude <CLc1> was down 4.6 percent or $2.31 at $47.80 a barrel.

Earlier in the day, both contracts were down by more than $3, or over 6 percent, the biggest intra-day declines for both since April 18, when a meeting of top global oil producers failed to agree on an output freeze.

Sterling <GBP=> sank 10 percent in value to its weakest since the mid-1980s. The FTSE 100 <.FTSE> fell more than 8 percent at the open, with banks among the hardest hit, but by 1140 GMT had recovered some ground to stand 4.3 percent lower.

“The global uncertainly that (the vote) is likely to unleash is likely to have a potentially negative effect on GDP growth, not only in the UK, but potentially in Europe,” said Michael Hewson, chief market analyst CMC markets.

“Obviously we don’t know that yet, but certainly in the context of where we were 24 hours ago, the knee-jerk reaction is to sell on the reality,” he added.

Some analysts said oil could face further downward pressure.

“Our view is that we have not yet seen the low oil price of the day with Brent likely to trade down towards $45 or lower before we have seen the worst of it,” Bjarne Schieldrop, chief commodity analyst at SEB, said in note to clients.

“Higher risk aversion is likely to make it hard for prices to regain the $50 per barrel mark in anything like the near future,” said Commerzbank analyst Carsten Fritsch.

BP <BP.L> said on Friday its headquarters would remain in the United Kingdom, despite the vote.

The vote to break with Europe is set to usher in deep uncertainty over trade and investments.

“Any further downturn in the economy or volatility in the oil price could cause further distress in the sector and in particular further project….deferrals might have significant consequence for the service sector who also rely on mobility of employees around the world,” PwC UK and EMEA oil and gas leader Alison Baker said.

(Additional reporting by Aaron Sheldrick in Tokyo and Florence Tan in Singapore; editing by Jason Neely)

Stock futures drop after Britons vote to abandon EU

Trader at BGC

By Tanya Agrawal and Yashaswini Swamynathan

(Reuters) – U.S. stock futures slid in premarket trading on Friday after Britain’s vote to quit the European Union delivered the biggest blow to the global financial system since the 2008 financial crisis.

S&P 500 futures and Nasdaq futures were down about 3.5 percent while those on the Dow Jones industrial average were off 2.8 percent, indicating Wall Street will open sharply lower.

By 8 a.m. ET (1200 GMT), the number of contracts traded on S&P futures had neared their daily average for the past year.

Investors worried about damage to the world economy sought refuge in the dollar and other safe-harbor assets such as gold and U.S. Treasury bonds, while dumping riskier shares. The yield on the U.S. 10-year bond hit its lowest since 2012.

Banks were among the biggest losers.

Britain’s FTSE 100 stock index was down 4.5 percent in early afternoon trading. Asian stocks also tumbled.

Amid the turmoil, sterling hit a 31-year low in its biggest intraday percentage fall on record and Prime Minister David Cameron said he would step down by October.

“The markets are going to trade violently and erratically through the day and it’s going to be a challenging equity environment until investors get greater clarity on the matter,” said Andre Bakhos, managing director at Janlyn Capital LLC in Bernardsville, New Jersey.

Citigroup <C.N>, Bank of America <BAC.N>, JPMorgan <JPM.N> and Goldman Sachs <GS.N> slumped by between 6.2 percent and 7.2 percent. U.S. banks have large operations in London.

Trading in S&P 500 and Nasdaq futures was halted briefly overnight after they fell more than 5 percent, triggering limit thresholds.

U.S. short-term interest rate futures rose amid speculation the Federal Reserve could cut interest rates to help shield the economy from any global fallout.

Investors have been waiting for the Fed to raise borrowing costs as the economy improves.

“It’s too early to assess whether we will have a negative interest rate environment. However, given the knee-jerk global response in the markets, it would seem that low interest rates are here to stay,” said Bakhos.

Fed Chair Janet Yellen said earlier in the week that an exit of Britain from the EU would have “significant repercussions” on the U.S. economic outlook.

Futures on the VIX <.VIX> volatility index – known as Wall Street’s fear gauge – surged 42.3 percent to 24.52, above its long-term average of 20.

The market was already expected to be volatile on Friday as traders adjust portfolios to account for an annual reconstitution of the widely followed Russell stock indexes.

Oil prices also slumped, dropping about 5 percent, the biggest drop since early February. [O/R] Exxon <XOM.N> and Chevron <CVX.N> were down about 3 percent each.

Among gold miners, Barrick Gold <ABX.N> was up 9.3 percent and Newmont Mining <NEM.N> was up 8 percent.

Apple <AAPL.O>, which got more than a fifth of its revenue from Europe last quarter, was down 2.7 percent at $93.48. Facebook <FB.O> was down 3.4 percent at $111.19

U.S. stocks had risen in recent sessions as investors bet that Britain would remain part of the EU.

As of Thursday’s close, the S&P 500 index had risen 3 percent since the start of the year.

Futures snapshot at 8:10 a.m. ET (1210 GMT):

* S&P 500 e-minis <ESc1> were down 73.25 points, or 3.48 percent, with 1,612,911 contracts traded.

* Nasdaq 100 e-minis <NQc1> were down 158.5 points, or 3.55 percent, on volume of 156,665 contracts.

* Dow e-minis <1YMc1> were down 504 points, or 2.81 percent, with 207,671 contracts changing hands.

(Additional reporting by Noel Randewich, Richard Leong and Rodrigo Campos; Editing by Alison Williams and Ted Kerr)

Europe steps up North Korea sanctions with oil, finance bans

North Korean leader Kim Jong Un speaks during a ceremony at the meeting hall of the Central Committee of the Workers' Party of Korea

By Robin Emmott

BRUSSELS (Reuters) – The European Union stepped up its sanctions on North Korea on Friday with near-blanket trade and travel bans after Pyongyang’s latest nuclear test and rocket launch, a move going beyond new U.N. Security Council sanctions.

Pyongyang is also banned from selling any oil-related or luxury goods to the European Union, while EU nations cannot invest in the country’s mining, refining and chemical industries.

“Considering that the actions of (North Korea) constitute a grave threat to international peace and security in the region and beyond, the EU decided to further expand its restrictive measures,” the Council said.

North Korea’s latest nuclear test was on Jan. 6. On Feb. 7, it launched a rocket that the United States said used banned ballistic missile technology. Pyongyang said it was a peaceful satellite launch.

The EU measures, which diplomats say are designed to show solidarity with major EU trade partners South Korea and Japan, come on top of asset freezes and travel bans for another 16 North Koreans agreed earlier this year. That puts 66 people and 42 companies under the EU sanctions regime.

EU foreign ministers have reinforced their sanctions several times in recent years to include asset freezes and bans on financing and the delivery of banknotes.

EU countries cannot export arms or metals used in ballistic missile systems and are banned from selling gold, diamonds and luxury goods to North Korea. Joint ventures are outlawed.

However, the impact of the new measures is likely to be limited as trade between the European Union and North Korea fell to just 34 million euros in 2014 from more than 300 million euros a decade ago.

Germany and Sweden are also reluctant to totally isolate North Korea. They have maintained diplomatic ties in Pyongyang since the 1970s, providing humanitarian aid to North Koreans.

(Reporting by Robin Emmott; Editing by Tom Heneghan)

Oil tops $50, lifts commodity stocks

Visitors looks at an electronic board showing the Japan's Nikkei average at the Tokyo Stock Exchange i

By Nigel Stephenson

LONDON (Reuters) – Brent crude oil topped $50 a barrel for the first time in nearly seven months on Thursday, lifting commodity and energy-related shares in Europe and Asia, though worries about U.S. interest rates and signs of slowdown in China limited gains.

Oil’s rise took it to levels more than 80 percent above January’s 12-year lows and was fueled in part by a weaker dollar, which fell against the Japanese yen.

European shares edged higher, led by the basic resources and oil and gas sectors. The pan-European FTSEurofirst 300 index rose 0.1 percent, pushing on from a four-week high hit on Wednesday. The STOXX 600 basic resources index rose 2.6 percent. Oil and gas added 0.4 percent.

Wall Street looked set to open with modest gains, according to index futures.

Within Europe, gains of 0.5 percent in Germany’s DAX index and 0.4 percent in France’s CAC 40 were offset by losses of 0.6 percent in Spain’s IBEX and 0.3 percent in Italy’s FTSE MIB index.

Japan’s Nikkei rose 0.1 percent, giving up earlier gains as the yen firmed, while MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.4 percent.

Chinese shares fell more than 1 percent at one point, with the CSI300 index touching its lowest since March 11 after data on Thursday showed profits at state-owned firms fell 8.4 percent year-on-year in the first four months of 2016, while debts rose 18 percent. However, a late rally saw the index close 0.2 percent higher.

Brent, the international benchmark oil price, rose as high as $50.35 a barrel, its highest since early November, in the wake of data showing a sharper-than-expected fall in U.S. crude stocks last week.

U.S. crude last traded at $49.90, up 34 cents.

“Geopolitical issues in West Africa and the Middle East, supply outages, increased demand and maybe a touch of a weaker dollar have all helped push prices higher,” said Jonathan Barratt, chief investment officer at Sydney’s Ayers Alliance.

He added, however, that the rally would not last as the higher prices would bring U.S. shale oil back on to the market.

In currency markets, the yen rose 0.2 percent to 110 per dollar and the euro was up 0.3 percent at $1.1182.

“Stuck in a corridor is a good word for the yen at the moment,” said Geoffrey Yu, a strategist with the UBS in London.

“For Japan the question is what will we see next from them to ensure that the yen can stay weak.”

The greenback hit a two-month high against a basket of currencies on Wednesday, and is on a roll after minutes of the Federal Reserve’s latest policy meeting and comments from Fed officials hinted that an interest rate rise could be imminent.

The cost of hedging against big swings in sterling over the next month hit seven-year highs on Thursday, according to options set to mature just after Britain’s June 23 referendum on European Union membership.

LOOKING TO YELLEN

Investors are looking to a speech by Fed Chair Janet Yellen on Friday for more clues to the rate outlook.

Yields on two-year U.S. Treasuries hit 10-week highs around 0.94 percent on Wednesday. They last stood at 0.91 percent down 1 basis point on the day.

German 10-year yields, the benchmark for euro zone borrowing costs, rose about 2 bps to 0.17 percent.

The market is already turning to next Thursday’s European Central Bank policy meeting, at which it will unveil new growth and inflation forecasts.

Higher oil prices have helped lift a gauge of long-term inflation expectations often cited by the ECB – the five-year, five-year breakeven rate EUIL5Y5Y=R&gt; – above 1.5 percent, though this remains below the ECB’s inflation target of near 2 percent.

(Additional reporting by Hideyuki Sano in Tokyo, Anirban Nag and Alistair Smout in London; Editing by Toby Chopra)

Iran-Saudi row threatens any OPEC deal

A gas flare on an oil production platform in the Soroush oil fields is seen alongside an Iranian flag in the Gulf

By Alex Lawler and Rania El Gamal

LONDON/DUBAI (Reuters) – OPEC’s thorniest dilemma of the past year – at least from a purely oil standpoint – is about to disappear.

Less than six months after the lifting of Western sanctions, Iran is close to regaining normal oil export volumes, adding extra barrels to the market in an unexpectedly smooth way and helped by supply disruptions from Canada to Nigeria.

But the development will do little to repair dialogue, let alone help clinch a production deal, when OPEC meets next week amid rising political tensions between arch-rivals Iran and oil superpower Saudi Arabia, OPEC sources and delegates say.

Earlier this year, Tehran refused to join an initiative to boost prices by freezing output but signaled it would be part of a future effort once its production had recovered sufficiently. OPEC has no supply limit, having at its last meeting in December scrapped its production target.

According to International Energy Agency (IEA) figures, Iran’s output has reached levels seen before the imposition of sanctions over its nuclear program. Tehran says it is not yet there.

But while Iran may be more willing now to talk, an increase in oil prices has reduced the urgency of propping up the market, OPEC delegates say. Oil has risen toward a more producer-friendly $50 from a 12-year low near $27 in January.

“I don’t think OPEC will decide anything,” a delegate from a major Middle East producer said. “The market is recovering because of supply disruptions and demand recovery.”

A senior OPEC delegate, asked whether the group would make any changes to output policy at its June 2 meeting, said: “Nothing. The freeze is finished.”

Within OPEC, Iran has long pushed for measures to support oil prices. That position puts it at odds with Saudi Arabia, the driving force behind OPEC’s landmark November 2014 refusal to cut supply in order to boost the market.

Sources familiar with Iranian oil policy see no sign of any change of approach by Riyadh under new Saudi Energy Minister Khalid al-Falih – who is seen as a believer in reform and low oil prices.

“It really depends on those countries within OPEC with a high level of production,” one such source said. “It does not seem that Saudi Arabia will be ready to cooperate with other members.”

 

HIGHER EXPORTS

Iran has managed to increase oil exports significantly in 2016 after the lifting of sanctions in January.

It notched up output of 3.56 million barrels of oil per day in April, the IEA said, a level last reached in November 2011 before sanctions were tightened.

Saudi Arabia produced a near-record-high 10.26 million barrels per day in April and has kept output relatively steady over the past year, its submissions to OPEC show.

Iran, according to delegates from other OPEC members, is unlikely to restrain supplies, given that it believes Saudi Arabia should cut back itself to make room for Iranian oil.

“Iran won’t support any freeze or cut,” said a non-Iranian OPEC delegate. “But Iran may put pressure on Saudi Arabia that they hold the responsibility.”

Saudi thinking, however, has moved on from the days when Riyadh cut or increased output unilaterally. Talks in Doha on the proposed output freeze by OPEC and non-OPEC producers fell through after Saudi insisted that Iran participate.

Indeed, differences between Saudi Arabia and Iran, which helped found the Organization of the Petroleum Exporting Countries 56 years ago, over OPEC policy have made cooperation harder – to say nothing of more fundamental disagreements.

For more than a decade after oil crashed to $10 in 1997, the two set aside rivalries to manage the market and support prices, although they fell into opposing OPEC camps with Iran wanting high prices and Saudi more moderate.

Now, the Sunni-Shia conflicts setting Saudi Arabia and Iran at each other’s throats, particularly in Syria and Yemen, make the relationship between the two even more fraught.

The two disagree over OPEC’s future direction. Earlier in May, OPEC failed to decide on a long-term strategy as Saudi Arabia objected to Iran’s proposal that the exporter group aim for “effective production management”.

With that backdrop, ministers may be advised to keep expectations low, an OPEC watcher said.

“The only aspiration OPEC should have for its 2 June meeting is simply not to repeat the chaos of the Doha process,” said Paul Horsnell, analyst at Standard Chartered.

“A straightforward meeting with no binding commitments and, most importantly, no overt arguments would be the best outcome for ministers.”

(Reporting by Alex Lawler and Rania El Gamal; Editing by Dale Hudson)